Income Tax Appellate Tribunal - Kolkata
Dcit, Cir-4(1), Kolkata, Kolkata vs M/S Goodricks Group Ltd., Kolkata on 31 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH : KOLKATA
[Before Hon'ble Sri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM]
I.T.A No.304/Kol/2015
Assessment Year : 2002-03
D.C.I.T., Circle-4(1) -vs.- M/s. Goodricke Group Ltd.
Kolkata Kolkata
[PAN : AABCG 1614 O]
(Appellant) (Respondent)
For the Appellant : Shri Saurabh Kumar, Addl. CIT(DR)
For the Respondent : Shri.P.N. Rajendran, FCA
Date of Hearing : 24.08.2017.
Date of Pronouncement : 31.08.2017.
ORDER
Per N.V.Vasudevan, JM
This appeal by the Revenue is against the order dated 31.12.2014 of CIT(A)-2, Kolkata relating to A.Y.2002-03.
2. Ground No.1 raised by the revenue reads as follows :-
"1 That on the facts and in circumstances of the case, the Ld. CIT(A) erred on in law as well as on facts in holding that cess on green leaf of RS.1 ,07,53,006/- is an allowable expenditure, ignoring the fact that it is directly attributable to core agriculture activities of the assessee assessed to tax under State Agriculture Income Tax beyond the purview of Central Income Tax and on the same issue SLP is pending in the case of AFT Industries."
3. The Assessee is a company and is carrying on the business of growing and manufacturing of tea. Besides the above the aforesaid business, the Assessee also manufactures instant tea and blended tea. Income from growing, manufacturing and sale of tea would be Composite income, which means it comprises agricultural income to the extent of growing tea, which is not chargeable to tax and non-agricultural income 2 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 to the extent it comprises of income from manufacture and sale of tea, which income is chargeable to tax. Rule 8 of the Income Tax Rules, 1962 provides method of computation for composite income from manufacture of tea. Under Rule 8 (1) of the Income Tax Rules, 1962 (Rules) income derived from sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax. According to the AO Cess on green tea leaf levied was an expenditure which was attributable to the activity of growing of tea and would therefore be not allowable as deduction while computing income from manufacture and sale of tea. According to the AO, the first step should be compute income from growing and manufacturing tea and without allowing cess on green tea leaf as a deduction thereafter 40% should be attributed to taxable income and 60% attributed to Agricultural income. The plea of the Assessee was that the entire green leaf cess had to be allowed as deduction while computing the composite income from manufacture and sale of tea and only on the loss or profit arrived at after such deduction Rule 8(1) of the Rules have to be applied and 40% of such sum has to be considered as taxable income or loss from the business of manufacture and sale of tea.
4. On appeal by the Assessee, the CIT(A) deleted the disallowance made by the AO by following the order of the Hon'ble Calcutta High Court in the case of AFT Industries Ltd. vs CIT (270 ITR167) wherein it was held that Green Leaf Cess has to be allowed as deduction before applying Rule 8(1) of the rules and only thereafter 40% of such income has to be brought to tax.
5. Aggrieved by the order of the CIT(A), the revenue has raised Gr.No.1 before the Tribunal. The Learned DR appearing on behalf of the Revenue relied on the order of the AO. On the other hand, the ld.counsel for the assessee relied on the orders of the ld. CIT(A).
2 3 ITA No.304/Kol/2015M/s. Goodricke Group Ltd.
A.Yr..2002-03
6. After hearing the rival submissions and on careful perusal of the materials available on record, keeping in view of the fact that the issue is concluded by the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs AFT Industries Ltd. 270 ITR 167 (Cal) where the amount paid as cess was held as eligible for deduction in computing the composite income under Rule 8 of I.T. Rules. This issue is, therefore, decided in favour of the assessee and against the Revenue by upholding the order of the C.I.T.(A) who has allowed the deduction of payment of cess on green leaves in computing the composite income from tea business of the assessee under rule 8 of the I.T. Rules. The fact that the SLP is pending before the Hon'ble Supreme Court against the decision of the Hon'ble Calcutta High Court in respect of AFT Industries Ltd. vs CIT (270 ITR 167) will not have any effect since the Hon'ble Apex Court has neither set aside the orders of the Calcutta High Court nor granted any stay. The learned counsel for the Assessee also brought to our notice the decision of the Hon'ble Supreme Court in the case of CIT Vs. M/S.Apeejay Tea Co. Ltd. Civil appeal No.3168 of 2006 dated 6.8.2015 wherein the Hon'ble Supreme Court has upheld view as was taken in the case of AFT Industries Ltd. (supra). In view of the above, Gr.No.1 raised by the revenue is dismissed.
7. The ld. Counsel for the assessee also drew our attention to the fact that reliance placed by the AO on the decision of the Hon'ble Gauhati High Court in the case of Jorehaut Group Ltd. 226 ITR 622 (Gau) was not correct and in this regard brought to our notice that the Hon'ble Gauhati High Court in the case of Assam Company Ltd 275 ITR 609 (Gau) after referring to its decision in the case of Jorehaut Group Ltd. (supra) clarified that cess on green leaf paid had to be allowed as deduction while computing the composite income. The aforesaid decision also supports the conclusion of CIT(A). It is also brought to our notice that in assessee's own case on an identical issue this tribunal in ITA Nos. 513 and 514/Kol/2004 for A.Y.1999-2000 and 2000-2001 by its order dated 13.08.2004 has also held that cess on green leave has to be allowed as 3 4 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 deduction while computing the composite income under Rule 8 of the Rules. In view of the above we do not find any merits in ground no.1.
8. Ground No.2 raised by the revenue reads as follows :-
"2 That on the facts and in circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that lease rent of RS.36,48,000/-, is an allowable expenditure, ignoring the fact that on similar issue revenue preferred the case before the High Court for the AY. 1999-2000 & 2000-01, which is still pending."
9. The assessee took a building on lease situated at 14, Gurusaday Road, Kolkata- 700019 for the purpose of its business. The assessee paid a sum of Rs.36,48,000/-as rent in respect of the aforesaid premises. The AO was of the view that since the assessee was the owner of the aforesaid premises, the claim for deduction of rent paid had not been allowed. The AO had not disputed the fact that the premises were used by the assessee for the purpose of its business.
10. On appeal by the assessee CIT(A) following the decision of the Hon'ble ITAT, Kolkata in assessee's own case in ITA No.498/Kol/2004 for A.Y.2000-01 order dated 13.08.2004 wherein similar addition made by the AO was deleted, deleted the addition made by the AO.
11. Before us the ld. Counsel for the assessee pointed out that the order of ITAT for A.Y.2000-01 was also followed by the tribunal in assessee's own case in ITA No.971/Kol/2015 for A.Y.2007-08 vide its order dated 04.08.2017. The ld. DR relied on the order of AO.
12. After considering the rival submissions it is seen that this tribunal in the orders cited after considering the material on record came to the conclusion that the assessee was not the owner of the premises taken on lease and therefore the deduction on account 4 5 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 of rent could not be disallowed as the user of the premises for the purpose of the business was not disputed. Following the orders of the tribunal on an identical issue we are of the view that order of CIT(A) does not call for any interference. Ground no.2 raised by the revenue is accordingly dismissed.
13. Ground No.3 raised by the revenue reads as follows :-
"3 That on the facts and in circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that disallowance u/s 14A of Rs.2,39,168/- was not warranted as nothing was incurred to earn dividend, ignoring the fact that there was investment during the period from which dividend was received and to earn dividend, administrative expenses cannot be ruled out, and reference may be drawn from the case M/s Cheminvest Ltd. wherein Delhi ITAT held that provisions for disallowance can be invoked even if exempt income was not received in any particular period and same view has been expressed by CBDT vide its circular NO.5/2014 dated 11.02.2014."
14. The assessee earned dividend income of Rs.5,11,520/- which was exempt and not chargeable to tax. According to the assessee it had not incurred any expenditure for earning the dividend income and therefore no disallowance of expenses for earning exempt income as contemplated u/s 14A of the Income Tax Act, 1961 (Act) should be made. The AO, however, estimated an expenses of Rs.2,39168/- as the probable expenditure that would have been incurred by the Assessee in earning the exempt income. In making the aforesaid estimate the AO gave the following reasons :-
"Expenses for the - (a) help of the management and other staff members to collect the dividend warrant and deposit into the bank and (b) maintenance of a consolidated account for both receipts of sale proceeds, interest bearing fund and utilisation of a part of the interest bearing fund for investment purpose. In view of such reasons he estimated a proportionate expenses at rs.2,39,168/- for earning the aforesaid dividend."
15. On appeal by the assessee CIT(A) deleted the addition made by the AO for the reason that there was no material to show that the expenses disallowed had been 5 6 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 incurred for the purpose of earning tax free income. The CIT(A) held that the Assessing Officer failed to identify any expenditure incurred for earning dividend income which was debited in the accounts. He also held that there was no fresh investments made in shares during the year and accordingly the interest debited in the account could not be treated as an expenditure relatable to earning dividend income. He also found that the dividend declared by the domestic companies were directly credited by the bank to the assessee's account by way of ECS transfer for which no expenditure had been incurred. He held that in the absence of incurring any expenditure for earning dividend income the disallowance u/s 14A by the Assessing Officer on presumption of expenditure being incurred for earning dividend income cannot be justified unless it is established that expenditure had been incurred in earning dividend income and such expenditure had been debited against the taxable income. The Assessing officer was accordingly directed to delete the disallowance of Rs.2,39,618/- u/s 14A of the Act.
16. Aggrieved by the order of CIT(A) the revenue has raised ground no.3 before the Tribunal.
17. At the time of hearing it was brought to our notice that identical issue of disallowance u/s 14A of the Act was considered and decided by this tribunal in assessee's own case for A.Y.1999-2000 in ITA Nos. 513 and 514/Kol/2004 by its order dated 13.08.2004. In the said order the Tribunal restricted the disallowance u/s 14A to 1% of the dividend income. The following were the relevant observations of the Tribunal :-
"5.1. We have heard both the parties and have gone through the orders of the authorities below. No doubt that no direct expenses has been incurred by the assessee in earning or making the dividend income. However, the assessee has claimed the composite expenses in its Profit & Loss account. Some of the expenses may be attributable to the earning of such dividend income. It is ..admitted that no new investment in shares has been made during the year and no barrowed capital has been utilized for the purpose of acquiring the shares. Considering the totality 6 7 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 of the facts and circumstances, we are of the considered opinion that if 1% of income by way of dividend is treated as necessary expenses incurred in relation to earning of dividend income which is exempted under the Act, it would meet the ends of equity and justice. And, therefore, we direct the AO to disallow 1% of dividend income as inadmissible expenditure against other business income inasmuch as of 1% of such dividend income is to be appropriated against the dividend income, which is exempted from tax under the provision of IT Act. The order of 'the ld CIT(A) is, therefore, modify to that extent."
18. Following the aforesaid decision, the parties agreed that the disallowance under Sec.14A of the Act be restricted to 1% of the dividend income. We accept the submissions in this regard and direct the AO to disallow 1% of the exempt income as expenses disallowable u/s 14A of the Act. Ground no.3 raised by the revenue is thus partly allowed.
19. Ground No.4 raised by the revenue reads as follows :-
"4 That on the facts and in circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that depreciation on assets acquired out of withdrawal from NABARD, the assessee had taken benefit and again depreciation on such assets cannot be allowed as this lead to double deduction against the basic principle of taxation and on the same issue appeal is pending before Hon'ble Calcutta High Court. "
20. We have already seen that the assessee is in the business of growing and manufacturing of tea. Under section 33AB of the Act where an assessee carrying on business of growing and manufacturing tea, if he deposits any amount in a specified account with a bank in accordance with a scheme then it shall be allowed as deduction in computing its income, equal to the amount so deposited. Under section 33AB(b)(6) of the Act if the money deposited is withdrawn in connection with the business for meeting any expenditure in connection with the business such expenditure shall not be allowed in computing the income chargeable under the head " profits and gains or business or profession" . Section 33AB (6) of the Act reads as follows :-
7 8 ITA No.304/Kol/2015M/s. Goodricke Group Ltd.
A.Yr..2002-03 "Section 33AB(6) Where an amount standing to the credit of the assessee in the special account or in the Deposit Account is utilized by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme such expenditure shall not be allowed in computing the income chargeable under the head "Profits and gains of business or profession."
21. The assessee withdrew a sum of Rs.1,74,35,500/- from NABARD (specified account) and this amount was utilized for acquisition of fixed asset. The deposit in NABARD was eligible for deduction u/s 33AB of the Act. Since the money was withdrawn and used for acquisition of fixed assets, the AO was of the view that the depreciation claimed on the fixed assets acquired by withdrawing the sums from NABARD account was an expenditure in connection with the business claimed by the assessee and was liable to be disallowed u/s 33AB(6) of the Act. The AO accordingly disallowed the claim of deduction of depreciation to the extent of Rs.23,49,180/-.
22. On appeal by the assessee the CIT(A) following the decision of the Tribunal in assessee's own case for A.Y.2001-02 in ITA NO.2557/Kol/2014 dated 10.06.2005, deleted the addition made by the AO. The Tribunal in the aforesaid decision came to the conclusion that depreciation is not an expenditure falling with the ambit of section 33A. The following were the relevant observations of CIT(A):-
" 6.2. I have considered the rival submissions and perused the materials on record. It is noted from the Tea Board Scheme that Clause (9) of the Scheme deals with the withdrawal and utilization of the amount deposited with NABARD. The said clause consists of' sub-clauses (a) to (k). On perusal of the said clauses, it is noted that no withdrawal can be made on account of depreciation being an expenditure. Therefore, the question of utilization of withdrawal from NABARD on account of depreciation does not arise. The specified withdrawal and utilization of amount deposited with NABARD include purchase of specified machineries and other assets only. The assets so acquired being capital in nature it was not an allowable expenditure in computing the income under the head "Profit and gains of business or profession".
There is no finding by the Assessing Officer that the assessee has utilized the amount withdrawn from NABARD for the purpose of any expenditure in 8 9 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 accordance with the Scheme in computing the income chargeable under the head "Profits and gains of business or profession". The issue involved for consideration is not whether depreciation is an expenditure or not but whether depreciation is allowable on assets which have been purchased out of the amounts withdrawn from NABARD u/s 33AB(6). The issue involved in the dispute is covered by the order of the Kolkata Bench of the Tribunal in ITA No. 2557/Kolj2004, dated 10.06.2005, for the assessment year 2001-02, in the assessee company's own case. In the said case the Hon'ble Tribunal upheld the decision of the CIT(A) deleting the disallowance of depreciation on the assets purchased out of the amount withdrawn from NABARD.
The depreciation on assets is dealt with in section 32 of the Act and not under section 33AB of the Act. Section 33AB has no overriding effect on section 32 as the said section does not start with a non-obstante clause "Notwithstanding anything contained in any other provisions of this Act". Since this issue was decided in favour of the assessee company by the Hon'ble Kolkata in ITA No.2557/Kol/2004, dated 10.06.2005, and respectfully following the said decision, the Assessing Officer is directed to delete the depreciation of Rs.23,49,180/- added to the profit u/s 33AB(6) of the Act."
23. Aggrieved by the order of CIT(A) the revenue has raised ground no.4 before the tribunal.
24. At the time of hearing it was agreed by the parties that the decision of the tribunal referred to by CIT(A) in the impugned order still holds good. In view of the above we do not find any merits in ground No.4 raised by the revenue and the same is accordingly dismissed.
25. Ground No.5 raised by the revenue reads as follows :-
" .5 That on the facts and in circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that deduction u/s 80HHC is to be applied before apportionment of Income under Rule-8, ignoring the fact that deduction u/s 80HHC is allowable against income assessed to Central Income Tax and as such, it is to be allowed after apportionment under Rule-8, contrary excess amount would have been deducted from income assessee to Central Income Tax as only 40% out composite income is assessed under the same."
26. The Assessee was entitled to claim deduction u/s.80HHC of the Act in respect of income derived from the business of export. One of the dispute before the AO on the 9 10 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 claim of the Assessee for deduction u/s.80HHC of the Act was as to whether the calculation of profit in the manner laid down in sub-section (3)(c)(i) and (ii) of Sec.80HHC of the Act is to be done by taking 40% of the profit derived from growing and manufacturing tea or by 100% of such income. It was the plea of the Assessee that Section 80HHC of the Act was enacted with a view to provide incentive to exporters. The wordings of sub-section (3) (a), (b) and (c) are clear as to the computation of the profits derived from such exports and also computation of export profit as a proportion to the profit of the business to the same proportion as to the export turnover bears to the total turnover of the business. The formula as per sub- section 3(a), which is applicable to the appellant's case, is as follows:
Export profit = Business profit x Export Turnover Total Turnover In this formula there is no scope for taking the business profit at 40% thereof where export turnover and total turnover are taken at 100%. The appellant submits that taking 40% business profit for computing deduction u/s 80HHC would render the formula unworkable. Thus the formula as per sub-section 3(a) in the case of appellant would be as follows:-
Export profit = 100% business profit x 100% Export Turnover 100% Total Turnover Thus the formula adopted by the Assessing Officer for computing the amount of deduction u/s 80HHC was erroneous in law. The Assessing Officer computed the said deduction as under:
Export profit = 40% business profit x 100% Export Turnover 100% Total Turnover The Assessee relied on the decision of the Hon'ble Supreme Court had an occasion to consider the formula referred to in sub-section (3) to calculate the export profit in the 10 11 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 case of CIT Vs Lakshmi Machine Works (290 ITR 667) and held that that while interpreting the formula u/s 80HHC one has to give a schematic interpretation, otherwise the formula became unworkable. By applying the interpretation of sub- section (3) by the Hon'ble Supreme Court in 290 ITR 667 (supra), the Assessee claimed that the profit of business should be taken at 100% of such business and not 40% thereof in order to make the formula workable.
27. The CIT(A) on a consideration of the above submissions was of the view that profits of the business for the purpose of computing deduction u/s 80HHC of the Act was composite income under the head " income from business or profession" and not the income after applying Rule 8 of the IT Rules. The following were the relevant observations of CIT(A) :
" 8.3. As far as the second issue is concerned, i.e. business profits for computing export profit under sub-section (3), I am of the view that profits of business is the profits as computed in accordance with sections 30 to 43D of the Income Tax Act and not 40% thereof as provided in rule 8. My said view is supported by the Special Bench of Kolkata Tribunal 301 ITR (AT) 171 (supra) and also the observations of the Supreme Court in item (v) in 297 ITR 17 (supra). The Assessing Officer is, therefore, directed to recompute the export profit u/s 80HHC(3) taking the business profits as computed in accordance with the sections 30 to of the Act but before applying rule 8 of the Rules and deduct such profit from gross total income of the assessee company."
28. Aggrieved by the order of CIT(A) the revenue has raised ground no.5 before the tribunal.
29. The ld. DR relied on the order of AO. The ld. Counsel for the assessee relied on the order of CIT(A). After considering the rival submissions we find that the issue raised by the revenue in ground no.5 is squarely covered by the decision of the Hon'ble ITAT Special Bench in the case of Kanaram Saha and Subhash Saha 301 ITR (AT) 171(SB) (Kol). In the case before the Hon'ble Special Bench in the case of Kanaram Saha and Subhash Saha (supra), one of the issue raised before the Special Bench was as to whether in determining the quantum of deduction under Section 80HHC, the non-
11 12 ITA No.304/Kol/2015M/s. Goodricke Group Ltd.
A.Yr..2002-03 inclusion of disallowed business expenses in 'profits of business' (having effect of reducing the deduction) is wrong, arbitrary, erroneous and contradictory (in the case before the Hon'ble Special Bench, the disallowance of expenses was u/s.40A(3) of the Act).In that case the Assessing Officer computed the income of the assessee on the basis of the returned income by making certain disallowances under Section 40A(3) and other expenses. He however while computing deduction u/s.80HHC of the Act did not include amount disallowed u/s.40A(3) of the Act as part of the Profits of the Business. The Special Bench held that the expression "profits and gains of Business"for the purpose of deduction u/s.80HHC of the Act means the profits and gains of business be computed in accordance with the provisions contained in Sections 30 to 43D of the Income-tax Act. The following were the relevant findings of the Hon'ble Special Bench:
"105. Learned Counsel for the assessee had also raised an additional ground in both the above cases which was with regard to computation of deduction under Section 80HHC. The additional ground is admitted by us vide our finding in paragraph 3.1 above. We have carefully considered the arguments of both the sides and perused the material placed before us. We find that at the end of Section 80HHC, there is Explanation which defines several terms used in Section 80HHC. Explanation (baa) defines the words "profits of the business", which reads as under:
(baa) 'profits of the business' means the profits of the business as computed under the head 'Profits and gains of business or profession as reduced by:
(1) ninety per cent, of any sum referred to in Clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India;
106. From the above it is evident that profits of business for the purpose of Section 80HHCmeans the profits of business as computed under the head "Profits and gains of business or profession". Section 29 of the Income-tax Act provides that profits and gains of business shall be computed in accordance with the provisions contained in Sections 30 to 43D of the Income-tax Act. Thus, whatever is the profits and gains of the business as computed by the Assessing Officer under the head "Profits and gains of business or profession", should be taken as profits of the business for the 12 13 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 purpose of computation of deduction under Section 80HHC. We, therefore, direct the Assessing Officer to recompute the deduction under Section 80HHC as per our observation above."
The ratio of the aforesaid decision, if applied to the facts of the present case can only lead to a conclusion that "Profits and gains of Business" for the purpose of computing deduction u/s.80HHC of the Act should be determined as per provisions contained in Sec.30 to 43D of the Act before applying Rule 8 of the Rules. In the light of the aforesaid decision, we find no merits in ground no.5 raised by the revenue.
30. Ground No.6 and 7 raised by the revenue read as follows :-
" 6. That on the facts and in circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that Long Term Capital loss allowable to the assessee as it was submitted during the course of assessment proceedings, ignoring the fact that neither in original return the Long Term Capital Loss was claimed nor did assessee file revised return u/s 139(5) for the same, the Assessing Officer has got no power to entertain any claim otherwise than filing a revised return as decided by the Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (284 ITR 323).
7. That on the facts and in circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that loss incurred in production of instant tea on the ground that the said activity does not relate to the combined activity of growing and manufacturing of tea, ignoring the fact that neither the said loss was claimed in the return nor did assessee file revised return for the same, the Assessing Officer has got no power to entertain any claim otherwise than filing a revised return as decided by the Hon'ble Supreme Court in the case of Goetze (India) Ltd.Vs. CIT (284 ITR 323)."
31. Both the aforesaid grounds are in relation to action of CIT(A) in allowing long term capital loss and in deleting the loss incurred in production of instant tea as part of the composite income before applying Rule 8 of the Rules. These claims had been made by the assesse before the AO without filing the revised return. The AO refused to entertain the aforesaid two claims for the reason that a valid revised return of income u/s.139(5) of the Act had not been filed making such a claim before the AO. According to the AO in the light of the decision of the Hon'ble Supreme Court in the 13 14 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 case of Goetz India Ltd. 284 ITR 323 (SC) any claim made by the assessee which is not supported by a revised return filed u/s 139(5) of the Act could not be entertained by the AO. On appeal by the Assessee the CIT(A) entertained both the claim of the Assessee and allowed the claim which is subject matter raised in Gr.No.6 and directed the AO to examine the claim of the Assessee which is subject matter of Gr.No.7. In Gr.No.6 and 7 raised before the Tribunal, the revenue has challenged the action of the CIT(A) in entertaining a claim by an Assessee which is not supported by a revised return of income filed u/s.139(5) of the Act. According to the revenue, the CIT(A) also ought not to have entertained such claim.. The CIT(A) on the aforesaid issue came to the conclusion that the decision of the Hon'ble Supreme Court in the case of Goetz India Ltd., is applicable to the power to admit a new claim by the Assessing Officer otherwise than a revised return. The said decision has no effect on the powers of the appellate authority to admit an additional ground or additional claim when all the facts of the case are on record.
32. Before us the ld. DR relied on the grounds taken by the assessee in the grounds of appeal. The ld. Counsel for the assessee relied on the order of CIT(A).We have given a very careful consideration to the rival submissions. We are of the view that there is no merit in ground no.6 and 7 raised by the revenue. The CIT(A) as a first appellate authority has the power to entertain a new claim even in the absence of a revised return of income. The Supreme Court in case of Goetze (India) Ltd. (supra) has clarified that "the decision was restricted to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under section 254 of the Income-tax Act, 1961". This has been interpreted in several judicial pronouncements as applicable even to the first appellate authorities. The Hon'ble Delhi High Court in the case of Jai parabolic Springs 306 ITR 42 (Delhi) has held that the appellate authorities under the Act, were free to consider a claim made by an Assessee even in the absence of a revised return of income and that the requirement for filing a revised return of income as laid down by the Hon'ble 14 15 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 Supreme Court in the case of Goetz India Ltd. (supra) is applicable only when a claim is made contrary to the return of income before the AO. The Hon'ble Delhi High Court in the case of Bharat Aluminium 163 Taxman 430J, has inter-alia ruled that assessee can file revised computation in the course of ongoing assessment proceedings under the Act, without making recourse to revised return, despite the fact that time limit for revising return under section 139(5) had expired. In the light of the aforesaid decisions, we are of the view that the CIT(A) was right in accepting the revised claim which are subject matter of Gr.No.6 & 7 before the CIT(A) and the CIT(A) was fully justified in admitting such claims for adjudication. We therefore dismiss ground no.6 and 7 raised by the revenue.
33. In the result the appeal by the revenue is partly allowed.
Order pronounced in the Court on 31.08.2017.
Sd/- Sd/-
[Waseem Ahmed ] [ N.V.Vasudevan ]
Accountant Member Judicial Member
Dated : 31.08.2017.
[RG PS]
Copy of the order forwarded to:
1.M/s. Goodricke Group Ltd., 14, Gurursaday Road, Kolkta-700019.
2. D.C.I.T., Circle-4(1), Kolkata.
3. CIT(A)- 2, Kolkata 4. C.I.T. - 2, Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.
By Order True copy Senior Private Secretary Head of Office/D.D.O., I.T.A.T., Kolkata Benches 15 16 ITA No.304/Kol/2015 M/s. Goodricke Group Ltd.
A.Yr..2002-03 16